Skip to main content

tv   Bloomberg Daybreak Americas  Bloomberg  December 29, 2016 7:00am-10:01am EST

7:00 am
daybreak on this thursday, december 29 here's i am alix steel alongside david westin. here is where we traded in the market, flat in the u.s. flat across the board. the ftse 100 backing off the record high it made yesterday. the fx market, it is sort of a cause of the recent trend we have seen. we have a bloomberg dollar index down for tens of 1% for the teststime in destin four of 1% -- 4/10 of 1%. treasuries that will allow for raises for that strong five-year option yesterday, in crude a little bit softer. david: jobs, jobs, jobs. announcesent-elect sprint will hire 5000 more people in the united states, part of the larger commitment
7:01 am
ahead head of the company talked about. how much difference will it make? market oriented 2013. u.s. stocks are, the dollar is, and oil is not. can a trend to continue or are we getting ahead of ourselves? china tightens its financial condition and says the launch of the compare less against the dollar than other currencies. content is global market get into thousands is, however could be a reason of how is 60. we want to the job with. president-elect trump announcing those 5000 sprint jobs. he came out to the door of his house to make that announcement personally. mr. trump: we have a conversation the sprint for 5000 jobs coming from all over the world into the united states, which is a nice change. and also one where, 3000 jobs -- company 3000 jobs, new
7:02 am
appeared -- new company. david: we are joined by then ready. we're seeing this regularly. how these are truly new jobs? about new jobs. ben: the carrier told us that is the commitment they are talking about, but how many of these were going to see? clear.ot exactly this is what donald trump campaigned on. he said he would go out and bring home the jobs. whether he can do that with 800e three and four figure, thousand here, whether he can bring back jobs in that way and scale up, that is the question a lot of us are asking. david: when he said he 5000 jobs and compare them with the 175 roughly we are creating every
7:03 am
month it is not that big. a creation of optimism that could have a larger effect on the economy? ben: i think that is exactly what it is. people want to see that he is bringing back jobs, in so far as that is what he campaigned on. he has been able to go back and bring back some jobs from mexico and overseas. he did it with a lot more carriage and stick them i think he campaigned on, a lot more on tax breaks and a lot less threats. it is the symbolism that he is getting away from the washington consensus, the president cannot go toe to toe with a ceo. david: he is also taking a different tack with respect to the transition, because there was an exchange yesterday where he came out with the tweet and said things would be -- things were really rocky with president obama. then they had a telephone conversation.
7:04 am
how is that working? ben: the tweets are often negative and even a little aggressive, and you have the phone conversations. the president-elect is always very polite on the phone. .t is a little bit unclear things seem to be going fine on the team level, those communication seem to be going fine, but there are concerns about jockeying about what the policies will be especially in the international sphere. david: the president-elect is s he isus of the visual sending. he appeared with don king who was convicted of a felony and pardoned. what is the symbolism with the american flags? ben: he is certainly a show man. a showg is certainly man, and they worked together during the campaign and clearly he wants to bring some of that flashiness to the transition. david: one thing is for sure --
7:05 am
don king is flashy. alix: for more on what trump's policies mean for the u.s. economy, i want to bring in riccr shoot don't -- steve huto. do these things move the needle? steve: it would move the needle if he stopped the bleeding. you just stop the jobs exiting the country, on a seasonally adjusted level you will have a pickup in data. that is very important and people are missing it in this overall question. some of it is how much we no longer lose, and that gets magnified in the seasonal factors. it is important that he has done this in the way he has done it, because if you think about the reagan administration, when reagan fired the air traffic controllers he made it clear to corporate america that labor was no longer on a pedestal.
7:06 am
what trump may be doing is saying to ceos, you go overseas and you are doing it alone, and there will be repercussions. i think that may be more important than bringing the jobs back, to stop the bleed of jobs overseas. alix: if you are a worker here in the u.s. and see things like that, that gives you confidence. is there a trickle-down effect? steve: if you were worried about your job you become a little less worried and perhaps you spend a little more, and get more optimistic about what your job future is. it allend of the day comes down to the money, what you were getting paid. you can be optimistic and confident and not lose your job, and you do not spend a lot of money because you are saving for retirement or year salary is not going up in your costs are going up. david: as an economist, give us a sense of the priorities. if you had asked us what the
7:07 am
biggest problems in the country where, i would not have said jobs. is this the biggest problem or is he trying to change the nature of the jobs? steve: i think it is a combination. you want to get a higher quality job and stop them from leaving the country. all you have left was minimum-wage jobs, so that is a critical piece. this is just one aspect of what he is attempting to do. he is trying to get better quality jobs back into the situation. david: this graph illustrates the point. it is what various presidents inherited as far as unemployment rate. inherited 6.4% and donald trump is inheriting 4.6%. steve: if you look at the participation between donald trump and barack obama, you see a big difference. if you turn that participation rate around you can get a lot of employment.
7:08 am
175,000 workers a month on average is not that great of a number. when he start to get to 200,000 plus you start to get into good --wth and you might not get alix: the other part of the data over the last week is that consumer confidence, in how many jobs were hard to get. the white line is hard's that are to -- jobs that are hard to get, around 22%, and the blue lane -- blue line is unemployment. the worry is perhaps we could see a decline in employment. thee: i do not think unemployment rate is a good indicator of where the labor market is. this is the box i think the federal reserve has got itself into. i think the unemployment rate is a very misleading indicator because they are changing the participation rate, the number
7:09 am
of people who left the labor market because they cannot get good quality jobs. as of the people likely to come back in. with a rising unemployment rate, rising jobs would be a very positive thing because an unemployment rate of 4.6% has the fed paranoid. as wellyment went up you might be in a situation where the fed could sit back and relax and let things go on. david: employment is one part of the picture, gdp growth is another. as we come to the end of the obama administration, where are we on gdp underlying fundamental growth? steve: obama versus trump, it is hard to compare. in this particular environment you have employment growth -- i should say gdp growth in 2016 probably around 1.5%, the lowest in six years. we will have a bump up in 2017 naturally because we changed a
7:10 am
little of the confidence environment, i think we will be up to 2.2% growth. still not great but better. alix: you brought up a significant point which is wages . if we get in a situation where inflation will rise faster than -- inflation will rise faster than wages? not get the rise in inflation that goes with the rising wages. the federal reserve says the labor market is tight and wants to run a high-pressure economy. why impression is the market is loose and if we can get high-quality jobs coming back, we can get a boost in productivity that keeps the inflation rate down while we get a higher wage composition to drive more successful growth. david: thank you so much for being here. riis u.s. chief economist at cchuto economics.
7:11 am
taylor: in syria government troops have agreed to a cease-fire at midnight. turkish media says the truce would not apply to terrorist groups and turkey considers u.s. -- islamic state and u.s. backed kurdish forces falling into that category. a routine stop by the president of taiwan is taking on added significance. he will transit -- she will transit through the united states next month. on december 2, president-elect donald trump angered china by speaking with the taiwanese leader over the phone and questioned the one china policy. actress debbie reynolds has died a day after the death of her daughter, carrie fisher. reynolds rose to stardom in a 1952 hit and was nominated for an oscar. debbie reynolds was 84.
7:12 am
global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. alix: u.s. equity futures are relatively flat but we have a lot of action overseas. takata up over 60%. the wall street journal reported we are going to have a $1 billion settlement with the doj. this would also include a guilty plea to criminal misconduct, but the fine would be allowed to be paid over several years. considering that story from japan, toshiba getting whacked yet again, looking at a three-day total loss of 41%. all up in the air because of what writedown they will have to see for their u.s. nuclear plants, but now it is starting to bring down the banks with exposure to toshiba.
7:13 am
sumitomo is down about 4% and the risk is spreading. in the u.s. premarket, nvidia shares are off another 2%. they lost over 6% yesterday, and a tweet by citroen came out against the stock. , we couldys by nvidia see some product announcements coming from the january consumer electronic show in vegas. david: oil falls from its highs closed in 17 months. how high can it go in the new year? that is next. ♪
7:14 am
7:15 am
alix: oil is off today, snapping its longest winning streak since 2010.
7:16 am
nevertheless, it has been quite a ride for the commodity. this shows what we have seen in the last few weeks. we have seen a huge rally, the biggest since 2010 -- i should say the longest winning streak as we end out what looked like a dismal year. , authorus is dan dicker of shale boom, shale bust. $26 in february and now we are at 53. what happens in 2017? dan: i think that is the worst chart of oil prices i have ever seen. david: congratulations. dan: i finally figured it out. 27 looks to be -- 2017 looks to be one of the best oil years in my history that i can remember. everything is lining up as a perfect storm and nobody would want to be short. there is the iea that says the oil will rebalance in 2017.
7:17 am
the eia says the same thing. . everybody coming into this trump administration has a connection to oil. he is a major shareholder index co. perry is a texas guy. oklahoma ands from i will say a climate change skeptic. the guy in interior is an anti-regulatory guy. you could go down. even the guy coming in as secretary of army, stood next to me five years on the nymex trading gasoline before he became chairman and making it algorithmic company trading oil futures. every come -- everyone coming in
7:18 am
has a connection to oil. alix: if you are that bullish and say everyone should be that bullish -- dan: did you make money? i did. alix: 20 you have long positions in wti, the white line. short positions are not elevated. dan: we may be ahead of the cycle. i think there an outside chance of triple digits by next year, but $55 getting closer to $60 next year, that may be the end of the cycle. it would want to be short when we are coming from very low prices and see that a rebalance is on the way. there is no peak demand problem like there was not a real peak supply problem we talked about a couple of years ago. the trump administration, with all of these oil guys, no one would want to be short. quickhere be a move down
7:19 am
based on guys who get long too early? yes. i see a steady climb upwards. that: how much is betting opec will hold? shale will not come in. we do not know if it is true or not true. the trump administration will free up -- dan: look at opec, for example. we know there is going to be a whole bunch of capitalizations going on in saudi arabia that they have a major interest in making sure that guideline hold. the russians have a major interest. there is economy is based on oil revenues. reasons to theof more convinced that all of these positives that we see going forward are going to turn into reality. what we have seen is the
7:20 am
stocks reacting to that. how do you play a potential balance? where is the value? question is the tough is as the oil price is slightly oil bmps aree, also slightly ahead of value. you do not want to short them. ,inding value here is the trick and partially what i do outside of appearing with you on bloomberg. david: are you equally bullish on nat gas? because imore bullish think one of the raised lng finds its way into reality in 2017 for the first time ever, including what they are doing with the corpus christi plant they will open in the next year. dominion should be done with their plant in maryland by sometime in the middle of the year. lng, i think instead of being a pipe dream, becomes a reality
7:21 am
and i think that will prop prices. alix: dan, great to see you. happy new year. david: good job, dan. [simultaneous speaking] david: we began this year with a shock to the markets that originated in china. could we have a repeat in 2017? this is bloomberg. ♪
7:22 am
7:23 am
alix: this is bloomberg daybreak. i am alix steel. the markets flat, low volume in the u.s.. the dow jones and u.s. equities flat across the board, the ftse 100 backing off the record high we saw yesterday. it is reversal of a trend we saw for the last few months, the dollar weaker and dollar-yen
7:24 am
slipping, kissing it's 20 day moving average. you have buying due to a very strong five-year option, yields coming off about three basis points and oil holding its line around 54. david: now it is time for bloomberg trends. you can find these if you go to read go. we are putting the top five up. . one of the top ones is china reduces dollar waiting in currency basket. we know last year they went to a basket waiting and have taken a percentage of the u.s. dollar, and they added the yuan at a 10% rating. they are trying to, i think, dilute their reliance on the dollar. when we keep talking about the yuan falling, it is always against the dollar. against the basket it has held up ok. alix: have a great chart that shows that. wait, it went away.
7:25 am
we have the yuan at an eight-month low and then a four-month high which poses some issues. capital outflows are coming out of china and there are so many controls to try to fix that. david: you really wonder if there could be a change in perception. if you are chinese, you might not be as panicked. we had a guest on yesterday saying it could go to eight. it might be that the chinese do not want to take their current the out of the country as fast. alix: we have seen a lot of risk that there could be more outflows on the one. the offshore your one is the white line -- yuan is the white line. you can see if i consume in, we have seen a lot more weakness in the offshore yuan, which means potentially investors feel more weakness coming next year as
7:26 am
chinese investors can swap out $40,000 of foreign exchange. i didnot know -- david: not know about this ratio, 50,000. it kicks out. it could affect the yuan. for: it is one of the risks 2017. a small cap manager at t. rowe price beats the market big-time. this is bloomberg. ♪
7:27 am
7:28 am
i've spent my life planting a size-six, non-slip shoe into that door. on this side, i want my customers to relax and enjoy themselves. but these days it's phones before forks. they want wifi out here. but behind that door, i need a private connection for my business. wifi pro from comcast business. public wifi for your customers.
7:29 am
private wifi for your business. strong and secure. good for a door. and a network. comcast business. built for security. built for business. hey, drop a beat.flix? ♪ show me orange is the new black ♪ ♪ wait, no, bloodline ♪ how about bojack, luke cage ♪ oh, dj tanner maybe show me lilyhammer ♪ ♪ stranger things, marseille, the fall ♪ ♪ in the same place as my basketball? ♪ ♪ narcos, fearless, cooked ♪ the crown, marco polo, lost and found ♪ ♪ grace and frankie, hemlock grove, season one of...! ♪ show me house of cards. finally, you can now find all of netflix in the same place as all your other entertainment. on xfinity x1. alix: welcome to bloomberg steel.k, i am alix about two hours before the open ,f trading in the u.s., flat
7:30 am
flat. the ftse 100 backing off its high from yesterday. marketcurrency and bond it is a reversal of the trend we have seen. broader dollar weakness. dollar-yen coming very close to the 20 day moving average, and you have actual buying in the 10 year yield after the killer auction yesterday on the five year yield. softer, downe bit 2/10 of 1%. david: here is what you need to know. .obs, jobs, jobs the president-elect and ounces sprint will hire 5000 people in the united states, part of the larger commitment the company will make. into 2017.r the dollar is up, bond yields up, and oil is up. can the trend continue in the new year? uncertain china, china tightens
7:31 am
its initial conditions and says the yuan should be compared less against the dollar and more against other currencies. how they could affect the global market, and how it could be a repeat of what we saw at the beginning of 2016. i want to turn into the subject of the markets roaring into 2017. it is time to's take -- time to take stock. matthew winkler has a morning must-read. "for the second consecutive year the top stock picker is a practitioner of the valuation 1930's.troduced in the the model considers earnings, dividends, oslo, and book value in terms -- in pursuit of companies trading at less than their net worth." let's reveal, who was it? wagner, he hasd
7:32 am
spent all but one of his 17 years professionally at t. rowe price in baltimore. david: how well did he do compared to the norms, the benchmarks? him tripled the s&p 500 so far this year, doubled the dow jones industrial average , and he beat all of his benchmarks and returned 30%. alix: we hear a lot about the valuation method, and graham wrote a book. what is it really? we talk about value investors. what does it really mean? matthew: the most simple way to define it is by low, sell high or look like companies just look for companies that are below their net worth. that is exactly what he has done with what we call small-cap companies. for example, one of his companies that had 146% return lancia's and health
7:33 am
care, is $305 million market cap. that is below what most analysts acknowledge as a company, and so by finding these really, gems, which he does, he is able to show their true value and hang on to them. by the way, he is a long-term investor, not somebody who just flips things. alix: it is looking for the stocks that literally no one knows about to help with the crowded trade. hedge funds kind of all owned the same thing. does that protect you from the herd mentality? matthew: he is the opposite. he is the opposite of alpha male. he is somebody with a very large team at t. rowe price look that great companies. they are all made in the usa, by the way. david: i wonder whether he has
7:34 am
found a market to pick up on said.lix we have people talking about companies we although -- we all know the names and tickers of. he is finding companies that are not covered by analysts and people do not know about. matthew: but we know about them on the bloomberg, and we found him, not the other way around. we look at these companies and can look at these companies using our bloomberg terminal. anyone who is a bloomberg user can do that. alix: how much of it has to do with luck? some of these health-care names were in and they got a big boost during the year as well. there was trump, brexit, a lot of external events. how did that wind up helping? matthew: he would be the first one to say better lucky than smart but he is very smart. rewarded foret being smart and patient at unexpected times in unexpected
7:35 am
ways. as we all know, the last does go months have been a move in the market. people have described it, including us, as a trump rally. he said that is a bit of a misnomer because the market improved in part if not entirely because the election was over, and that was the driver. what was really driving the companies that he picks is the underlying economy, and that was pretty good and has pretty -- has been pretty good all year long. david: you say you do not pay attention to events like the election but you say a fair amount has to do with health care and obamacare. if that gets regan, does that affect value of his stocks? matthew: not really in his estimate, because most of the companies he selected are what we would consider diagnostic or therapeutic companies. the demand for both of these products and services is only
7:36 am
going to go up, whether there is obamacare or not. it is going to happen. obamacare has certainly helped, but is not the only driver. david: matt winkler will be staying with us. 2016 may go down as one of the toughest years for hedge funds with 800 closed in the first nine months of the year, and the fewest startups, 576. --io savoldelli joins us. matt has touched upon something that is incredibly important, the ability of managers to actually get something done. we have a manager who is running about $9 billion, so he can still get his alpha, using that ugly, out of fashion word come
7:37 am
into the portfolio and get his or her ideas into the portfolio. when we look at a lot of what has been going on, the actual correlations we have been seeing between the top-performing hedge funds, the so-called activist managers that are some of the highest performing, what we have the data isn with you see a correlation running in the 80% range. when you take out the two and fornot much in it investors. people are starting to look at these mutual funds is very much a stockpicking alternative. graham and dodd, the fellow that run -- one last year. the fidelity team, it was a graham and dodd fund as well. these guys march to their own drum and follow their models, or the ones that are succeeding in a sheeplike market. david: how much does the structure of the hedge fund and how much is just the price?
7:38 am
if we were to an 20 or one and 10, with a hedge fund model be more effective? matthew: i am not qualified to answer that question. you need to go to people much smarter than i am. all i can say as a reporter observing this is everything that he does can be empirically verified. there is not really anything in his research or strategy that is a mystery, which is reassuring, by the way. atn i said he looks companies over the long term, he looks at how they function and operate and their markets, he breaks it down. when he sees companies -- and there are many of them that are underappreciated largely because they do not have the following. they do not have a following with institutional investors or analysts. he is somebody who takes advantage of that. alix: what strategies in his fund world are working very well? fabio: right now i think the
7:39 am
biggest challenge when people look at what has been going on is the disappointment, i think, for some of the strategies that should have been going really very well. when we look at macro funds, they are up a grand total of 2% to 3%. i pulled up a chart, over the first half of the year we saw, what did these guys do? they invest in bonds and commodities. commodities are up 14%, bonds up 10%. that is a pretty extraordinary that time. if you are a macro investor, have you bought almost anything you would have been there. in the second half of the year if we pull that up, what you will find is what you end up with is exactly similar returns, another 22% was available i
7:40 am
being short the bonds. yearet your return this taking zero, and you ask yourself about the structure of these funds. do you have a huge number of people just buying and selling stuff with each other? looking forward, macro i think has to make a lot of sense. when you look at the opportunities that have been missed by a lot of the big macro players, small macro players can take a model and execute their ision versus, i think brexit going to happen and you think it is not. we offset each other and the fund goes nowhere. matthew: one of the things that david wagner did was nine months ago, even longer, he said, i love financial companies. this is when they are totally depressed. pe's are at historic lows, and he says i like them
7:41 am
because they are so cheap. he felt ready crummy by his own admission -- pretty crummy by his own admission when he bought the stocks. here we are today, financials are the biggest part of his fund and he is up 30%, largely because the financial companies are performing well. if you think about that in a macro sense, that makes a lot of sense. the u.s. economy is maturing. the u.s. economy is relatively strong going into 2017. what pillar of the economy is likely to do well in that context of financial companies? , the equityllow up long short funds this year have 2%,cally a goose egg, 1%, something along those lines. here is a mutual fund that is returning some 30 odd percent. the argument had been, it is not been a stock picker's argument -- market.
7:42 am
the good stocks are going up with the bad stocks, and that is called dispersion. there is a measure of dispersion that will look at the top-performing stocks versus the bottom, and this year it has been some 20% to 30% higher than in the past. i have been some years where the dispersion has been pretty low, but now it is as wide as it has ever been. on average, and after the trump rally, it has widened in europe. if you are a leverage company there was a point where they fell out of bed. there is things a good manager can go a long asked and short stock why, and make good money y andlong on stock x short stock, and make money. here. thank you for being alix: coming up, shale oil
7:43 am
companies are getting ready to play kick it with supply and demand game. we will speak with tam dove and their plan for next year. this is bloomberg. ♪
7:44 am
7:45 am
alix: -- taylor: this is bloomberg daybreak, i'm taylor riggs. posen, president of the peterson foundation for international economics. alix: 2016, a year that began lows bute hitting ending with a surprise opec agreement. 2017, we look at how oil producers like ryanair natural resources will recover.
7:46 am
natural resources will recover. i sat down with tim dove. tim: absolutely not in our case. we had such a huge acreage position with so many locations to drill. today calculated 20,000 locations but internally we look at numbers like 35,000 locations to drill. he has such a huge amount of acreage that is tier one, the center cut of the basin. this is an area that is deeper, higher pressure, higher productivity, by definition of the depth. we have huge inventories, 5000 to 10,000 immediately ready to drill that are as high quality as we have just drilled. 5000 to 10,000 of those same exact wells ready to drill. we need to continually improve and improve productivity and
7:47 am
reduce the cost. alix: when you talk about that tier one, is that your high-grade locations? what is your runway? the high-grade means this is an area where we would look at the combination of high pressure and depth, and say these will be the highest productivity wells. alix: how many years of inventory do you have? tim: we have decades. plan isook at 2017, our to drill 260 wells. with an inventory that is 20,000 wells, perhaps half of which are in that tier one area, that is 30 years. we have decades to drill. i am not sure i will be here 30 years from now looking at all of these wells being drilled. alix: the other argument i have heard is that the well has all these layers like a cake, and you go to market and say here is how much i can get out of each of these layers, but it is hard
7:48 am
to tell that versus a one layer cake. i think you have a stratification of different zones, that is clear. if you look at the best zones that we joy will -- drill, it is easy to see us making 1.2 million barrel wells, 1.5 million barrels in some cases. alix: is there a risk you do not hit that? tim: on a different zone, say maybe the upper spray very zone they make only 800,000. wello not go to that first, but there are people who would die to have 800,000 barrels. alix: what happens if something goes wrong in the permian? you are getting all of the eggs on the permian basket. what happens if fondling -- fundamentally something goes wrong? tim: we first of all have artie
7:49 am
seen what happens -- already seen it happens in a high activity situation which occurred in 2010 through 2014. we saw activity and we can compete impeccably against that situation. i have no concerns. if you look at it from the standpoint of oil prices, that is another story. fundamentally, we are in the margin business. you have seen this time and time again. as prices go up, that is a signal for services and costs to come up so when the prices go down, the opposite signals are given. we are a responsive industry. margins are the number one priority, especially on a manufacturing business. if you have a issues and cannot get the pipelines built, that is what some are worried will happen, you are 100% exposed. tim: let me tell you this --
7:50 am
will buildas, we pipelines. we will be a major exporter of the gulf coast. we have a massive market called space where there is incentive to build this kind of infrastructure. it does not make sense for us to build pipelines and it makes a lot of sense for them to do it. they are lining up at our door. alix: at one point can you find your assets -- projects with the assets from the permian? tim: it will in us is allow us to have free cash neutrality in 2018. when the have our capital budget from internal cash flow, that has been an important goal. alix: what oil price is that model in? tim: $55 to $60. differentou get a price, how does that change? tim: five dollars here and there
7:51 am
probably does not change dramatically. we are looking for a long-term growth rate of 15% per year. we have a model showing us earning 15% per year each year. alix: that was my interview with tim dove. the stock is up 42% so far this year. the risk is that they have to keep on delivering at such a high bar, so they outperformed their peers in their ability in the permian. and they keep doing that or at some point do they come to match their peers? david: what struck me is how confident he is in his business. he does not believe in diversifying. alix: we are basically making a profit at $20 oil. you have a lot of wiggle room. the question being, how disciplined will it be when oil goes on the upside or did they put the screws to them self by over supplying? david: --
7:52 am
alix: they are all saying cash flow neutral. david: we will see. now it is time for other stories making headlines at this hour. here is taylor riggs. taylor: an investor letter says china would outlast the u.s. in a trade war and the commentor fight ishat the trade a distinct possibility under a trump administration. city university of hong kong president james wang -- japan,takata corporation rose by the daily limit after news that they are coming close to a settlement. a deal may include pleading guilty to criminal misconduct and paying fines of up to $1 billion. the airbags were the center of the biggest auto recall ever. toyotas strategy on hybrid
7:53 am
vehicles is paying off. are expected to make up more than half of toyota sales in europe by the end of the decade. that is your bloomberg business flash, i am taylor riggs. alix: coming up, we will examine the big theme of 2016 into 2017, brexit is next. ♪
7:54 am
7:55 am
ofx: we are examining all the major themes of 2016 into 2017, and today we are looking at brexit. this is sterling, absolutely pounded this year. you can take a look at what happened on brexit day, it fell 8% june 24. it is not where we were on black wednesday in 1992. we only saw 4%. it is a good reflection of how much sterling was pounded this
7:56 am
year, the worst against the dollar in more than three decades. the other part of the story has to do with the yield curve in the u.k. those white line is where we were in the red line is where we are today. you can see how much steeper the yield curve is and how much we have inverted. reflecting a lot of short-term anxiety when it comes to article 50. could be triggered in march. this will be a key theme geopolitically and market wide throughout 2017. twc emerging markets portfolio manager david robbins and his key take on china and emerging markets. ♪
7:57 am
7:58 am
7:59 am
alix: welcome to bloomberg
8:00 am
daybreak on this thursday, december 29. i am alix steel, alongside david westin. jonathan ferro is off today. we are trading flat across the board. the ftse unchanged. you have weakness in european stocks, flipping negative for the year. it is ax market, reversal of the trend. a broadly weaker dollar -- down .3%. dollar-in around the 20-day moving average. you have some buying -- a five-year note auction yesterday that was strong. you have a seven-year note auction today. david: here is what you need to know at this hour -- jobs, jobs, jobs -- the president-elect announces sprint will hire 5000 people in the united states, part of a larger commitment the head of the company talked about when he met with the president-elect earlier. how much difference will it make
8:01 am
for the u.s. economy? markets more -- the dollar is up, oil is up, bond markets are up. can the try to continue in the new year, or are we getting ahead of ourselves? an uncertain china -- china tightens financial conditions and says the yuan should be compared less against the dollar than other global currencies. if it can be a repeat of how we began 2016. that is what you need to know at this hour. we want to go to the question of donald trump and the creation of jobs. talking to us about what the president announced is bloomberg editor and chief emeritus been ben brody.d let's see what he said yesterday at the doorway of it is some. i spoke with the head person. he said because of me, they are doing 5000 jobs in this country. jobs.re also doing 3000
8:02 am
david: that was the announcement by the president-elect. you cannot avoid the visual there, with don king, who was -- withd of the felony the flags. en: the israeli and u.s. flags. david: we knew about the announcer before. how important is this, really? it is important in what he is trying to say -- this idea that he cannot call up the boss and negotiate for 800, 3000, 500 jobs at a time, that is out the window. whether there was anything new yesterday, i do not think there could say. i think trump is not going to let go of the idea use negotiator in chief. david: he has a tough time if he says i'm going to get employment
8:03 am
up. if you are looking at what he inherited as opposed to what barack obama inherited, he has a lot of employment going on already, before he comes into office. matt: in nominal terms, he is inheriting one of the lowest unemployment rates in u.s. history. in answer to your question, not important -- what he said is not important. in the news industry -- david:. a chart that what you are talking about. surprises, look for there are not any surprises. he is a showman, and entertainer, the president-elect. a little bitember of history -- when fdr came in, a lot of what he did was showman. the fireside chats were getting americans confident again. offices havey post
8:04 am
you been to that were built by the new deal? how many dams and bridges have you traveled across through in the notices that were created in the new deal? fdr actually did something very am a very big. it is called infrastructure. it did create jobs. the appalachian trail got blazed with fdr. all kinds of things happened where people got put back to work. david: after he was in office. donald trump has not been in office. alix: that is chew. how big is the confidence game donald trump wants to play? i would put it at one billion. that is the size. he will have resistance. democrats are worried about the privatization. republicans are worried about the spending. david: when you talk about what donald trump is inheriting in terms of the economy -- you brought a chart, matt, in terms of gdp growth, that illustrates your point. matt: if you look at the u.s.
8:05 am
gdp right now, it stands alone developedld of economies. the united states is the only developed economy with record gdp. there is not another developed economy since the financial crisis and the ensuing recession that has managed to get back to where it was. the united states is the only economy. by the way, very important fact completely left out on the campaign trail in the past year --i mean, nobody said anything about it. alix: the question then becomes how much more jews can trump add -- juice can trump add to it? how much more can he really do? the really big question. he is challenging the norms. he is coming out, challenging these ideas. if we are going to see -- you know, continuing to look at the level of 5000 jobs when we are producing anywhere between 175,000 and 225,000 jobs a month , it is not very clear that he is going to be making a, sort of, big dent proportionately.
8:06 am
david: the president-elect did not really talk about jobs yesterday but he also talked about russia. mr. trump: i think we ought to get on with our lives. think computers have complicated lives very greatly. the whole age of computer has made it where nobody knows exactly what is going on. we have speedy, a lot of other things, but i'm not sure you have a kind of spirit unit. david: i do not remember a time when the president-elect and the president seem to be headed in different directions. this is talking about possible sanctions such words out of the white house where we are prepared to take action. the president-elect says let's let bygones be guide the -- be bygones -- computers are complicated, we do not know what happened. ben: we have seen the detente between them start to crumble. at the end of the day, this is striking. it might be part of the reason
8:07 am
president obama wants to move quickly. i think he could've, and in another situation, rely on the idea that his predecessor, whether that was a republican or a democrat, would be objecting to foreign interference in a u.s. election, whether or not it affected the outcome. president obama does not have that luxury right now. he is definitely trying to move quickly in a moment where they are already trying to be two presidents in a certain way. alix: what are the economic locations -- obama trying to push things through, and trunk saying everything you do i will change -- what will that do? economy will move regardless of what obama does, and whatever trump does. many economists would say rather be lucky than smart, because they cannot control the economy as they would like to, even when they of congress.es there are things that on the margin make a difference and can affect sentiment. that is the answer to your
8:08 am
question -- what happens to sentiment when donald trump becomes president? so far, so good. claus at thista point. he is promising tax cuts, jobs. it all sounds wonderful. we should all be so lucky. but it remains to be seen what he is going to be able to do in is reallyar, and it sentiment that you ought to be focusing on, not the underlying performance of the economy. david: the wanton we know for sure is there will be a lot of news to cover with the trump presidency. matthew winkler, and ben brody, thank you both for joining us today. now let's get an update on what is happening -- making headlines outside of the business world. taylor riggs. taylor: a cease-fire in syria's civil war will take the place at midnight, local time. syrian tv says the agreement paves the way for talks aimed at
8:09 am
ending the conflict. russia says president-elect's donald trump administration can join the peace process when he takes office. there is indication the crash of a military transport plane was not an act of terrorism. a military official says analysis of the flight recorder shows there was no explosion on board. the plane crashed into the black sea shortly after takeoff. almighty to people on board were killed. actress debbie reynolds has died a day after the death of her daughter, carrie fisher. she rose to stardom after the 1952 hit "singing in the rain," and later as a heroine who survived the sinking of the titanic. she was 84. this is bloomberg. futuress. opening totally flat, but we have some movers, starting with twitter, up by .5%.
8:10 am
the company is adding 350 virtualvideo, joining reality. facebook and youtube already have the future. now twitter will as well. ie stock still don't morning percent this year. we also want to hit on sprint. up -- downk still 29% this year. we also want to talk about sprint. in the commodity market, forget about oil -- that stock about what is happening with sugar, up today by over 2%. straight day with a gain over 2%, the longest up streak since september. it is all about supply. india is the largest sugar consuming nation and it is headed toward a shortage. missing.s are david: emerging markets had a rocky year in 2016, but after a rough start, china found in
8:11 am
space and finished relatively strong. what do we have to look forward to in 2017? that is next. this is bloomberg. ♪
8:12 am
8:13 am
david: welcome to bloomberg daybreak. -- alix: welcome to bloomberg daybreak. i am alix steel. when the key worries -- what happens in china -- financial conditions are tightening, and it could get worse. look at this chart. yields are spiking -- the blue line. kenny's markets are set for their worst month in a decade. the purple line is the repo rate. that will rise, and according to a survey, that will rise further in the fourth quarter. we are joined by david robbins. security, tightening
8:14 am
financial emissions -- what kind of china do we see next year? david r.: china is an urgent situation. 2016, everyone was negative on china and we got growth between 6.5% and 7%. we think politically stability is the most important thing. they will look to achieve growth somewhere in the 6% to 6.5% range. what that means in interest rates is you will see more focus on fiscal policy in china to promote growth. there are issues on the corporate side with leverage. that has been an issue in china. that is an issue policymakers are well aware of in the country. so, we think it is more a year of stability in china, but there are risks. we will be watching capital outflows because that will be the key variable to look at and see whether they continue to increase over the year. alix: and it seems like you might know these are the issues, but the key worry is how strong is the dollar, and what kind of
8:15 am
pressure that is that put on r flow and the dollar dominated -- denominated debt? 25%le can see as much to appreciation in the dollar. how does that trickle to china? china, as its currency weakens, clearly becomes more competitive. their interest is to weaken the currency slowly, if they can manage the process. they have a difficult balancing act with what they are doing. we think the opportunity in china is less on the fixed income side, and more on those opportunities where there are long-term trends of growth, in particular, health care or technology. david: if stability is the most important thing for china going there017, and you predict will be stability, isn't that a trade-off against reform? if you go after state-owned enterprises, that could lead to instability. how do you make sure credit is going to good companies that are productive and efficient, and not going to support companies that should be out of business,
8:16 am
frankly? david r.: that is the challenge. when you focus on stability, you put the reform agenda on hold. it is still progressing. interesting things about china is they have tremendous overcapacity in certain industries. i realize that, and they are starting to shut it down. that is a long-term process. china is not looking at just 2017. they are looking at 2017 and beyond. alix: that is why you sent tech was an area you like, but unnecessarily in fixed income. tell us your conviction trades longer-term in china. david r.: we think china on the fixed income side is expensive. when we focus on investing in debt in emergence mark -- emerging markets, we are looking at latin america, eastern europe. other opportunities in asia where we see significant higher growth and less of a buildup of debt. for us, india -- and tunisia, asia, they are languishing in china. let's talk about latin
8:17 am
america and reform. argentina has undertaken reform. where do you see a particularly attractive on the fundamentals in latin america today? seymour populism in the developed markets than a reform agenda in emerging markets. brazil, 2016, you had a political scandal. now you have a new government in and people focusing on fiscal consolidation. in argentina, growth has been tough to generate. at the same time, they have been a tremendous amount of reforms in a short period of time. but the stories in argentina, we like the stories in brazil. ethical and china are more difficult because of the rhetoric around the election and trying to figure -- mexico and china are more difficult because of the rhetoric around the election in trying to figure out what we'll see with the president. david: trade issues. david r.: is a big issue. the markets have price that in
8:18 am
pit we have seen a rally in the dollar. the market has gone to a pro-growth you with a look at equities vis-a-vis fixed income. we think a lot of that is priced in. as negative as people were in 2016, we think in 2017, maybe they are too positive on the growth story. all we need, i think, for emerging markets to perform well is really stability in rates. if rates can stay at these levels, or even within 25 basis points, the added yield to emerging markets gives you significant upside. we are talking about creating portfolios with seven present yields, wherein the developed markets, in general, most of the dead is trading at 2.5% or less. and foesrging market have been back and forth. this is emerging market etf's. inflows and outflows. september and november was particularly rough, and that was before the fed rate hike. if we get three rate hikes or potentially faster inflation in
8:19 am
the u.s. or a faster fed, what is that due to the outflow situation? post-brexit we saw a terminus amount of inflows. post election, concerns about trade, a significant amount of those inflows reversed. i would say somewhere between 10% and 20%. for us, going forward, that really is the big question. where our rates going to be? we are still in a world where we have anemic labor force growth. in munich -- anemic productivity growth and excess capacity globally and a tremendous amount of unemployment globally outside of the u.s.. we think it is going to be difficult for the u.s. and economies in general to achieve a tremendous amount of growth in 2017. that will be the challenge. alix: dave, they do so much for coming. good to see you. david robbins, portfolio manager for tcw emerging markets trenches.
8:20 am
markets are back from the brink, but what does 2017 look like? we will discuss next. this is bloomberg. ♪
8:21 am
8:22 am
david: this is bloomberg daybreak. -- alix: alix: this is bloomberg daybreak pet i am alix steel. we stand flat, flat, flat, and soft trading across the board. , it is our back from the brink. materials will cap their first annual rise since 2010. you have gains in energy, gains in metal. we bring in kenneth hoffman joining us from princeton. i we at the start of a super cycle? is that what 2017 is going to be? do not think a super cycle is what anyone is looking for, but it is not the end of the world.
8:23 am
an investoryou are in anything but metals and mining, you made a killing. equities were up, rebounds in every metal. china is going to, as will the last guest included two, it will deflate the bag, but attitudes that but at --but at its pace. based metals -- thermal coal, up 60%. iron or up 80% we have a chart that showse the main metals. which will be the outperformance next year and wife? --why? ken: everything comes back to china. china knows they have overcapacity and they know they in cement, the soe's coal, and steel under control. they passed laws to limit the number of production -- days of production. they overcome production. when the market was not so bad in 2016, these prices, which
8:24 am
were depressed, exploded to the upside. several hundred percent for something like coking coal. 2017 will be the plan. -- will be more the st. peter china has a plan. the president will not want any disruptions into this year. he was a quiet year. you will see the chinese step into the marketplace and not let things get too much to the downside. alix: this will be about managing supply, not about ramped up demand ken:. -- demand. ken: exactly have there are certain commodities the chinese control -- iron ore, steel, cement, call -- they will make sure those, is that are key to the growth will not collapse. they will slowly decline in terms of capacity, but they will not let it fall off a cliff. glencore isrd hiring people to start a mine in northeastern australia.
8:25 am
missable, higher prices are incentivizing production. how much of that will be from big miners next year? ken: not too much. it takes a lot for minors to get production back. any new mind supply is many years away, and these miners felt the burn. many of them are going to go out there, restart, put a lot of new minds anyfinding new nes anytime soon. the when we were about the most this copper -- there is very new supply coming on. there's a lot of supply in the marketplace in china. look at lme inventories last week -- they dropped. we have a bloomberg metals and mining chat. they say that was at a warehouse in china. 150,000 tons of copper a week is a lot of copper sitting out there. alix: what does this mean for big metal -- bhp, glencore?
8:26 am
are going to see, and you have already seen that their cash flows exploded. the question is what do they do with newfound wealth? do they pay down their debt or go back to their old ways? getting agements are good present right now from christmas. what are they going to do with that present. alix: that is a good question. great to see. kenneth hoffman of bloomberg intelligence. coming up, the biggest risks ahead for 2017. we focus on geopolitics, and how it may take center stage. this is bloomberg. ♪
8:27 am
8:28 am
8:29 am
this is bloomberg daybreak. i am alix steel. here is where we stand in the markets -- it is flat, and there are low volume. -- low volumes.
8:30 am
market is the reversal of a trend we have seen. a broadly weaker dollar, down .3%, but dollar- yen also weaker, off .3%. we have a seven-your option at 1:00 p.m. causing buying. crude is going nowhere. david: here is what you need to know what is our. jobs, jobs, jobs -- the president-elect announces sprint will hire 5000 people in the united states, part of a larger commitment ahead of the company talked about after he met with mr. trump earlier. how much difference will it make for the u.s. economy? markets roaring to 2017 -- u.s. stocks are up, the bond yields are up, and oil is up. can the trend continuing the new year, or are we getting ahead of ourselves? an uncertain china -- china tightens financial conditions and says the yuan should be compared less against the dollar than it is other current is it
8:31 am
how china could affect global market in 2017 and whether it could be a repeat of how we began 2016. that is what you need to know it is our. breaking news -- initial jobless claims coming in at 265,000 jobs last week, lower than a week before, in line with estimates. the interesting numbers have to do with inventories and the trade balance. the trade balance was a -65.3 billion. that widened from the previous month. wholesale inventories were actually up .9% in november, and october was actually revised higher as well. retail inventories were also up by 1% month on month. these are important because these are inputs into gdp. balance greenee focuses the strong dollar. it does the reverse of what donald trump wanted, reduces exports. alix: and imports become more competitive. at some point you will wind up
8:32 am
refilling them. we are down to the morning meeting where we hear what key banks are looking at and we're looking at the investment grade credit market. joining us is the blackrock head of u.s. investment trade credit, and bloomberg -- who i turn to when i have a dumb question about credit. the big question for 2017 is what will happen. what is the deal with issuance? issuance this year should be down from where we were last year. last year at this time there was a large pipeline of merger and acquisition financing that needed to be done. that is much lower heading into this year. furthermore, i think when you think about the environment that we are in, there is a lot more maturity this here. so, not supply should be lower, which is something people focus on. to the extent there is a fair
8:33 am
amount of uncertainty with regard to policy, particularly corporate taxes, that should delay decision making and push supply off as well. furthermore, if you look through the proposed tax policy, a lot of that, i would argue, has the risk to further limit supply, certainly at least in the first half of this year. if you no longer can deduct interest payments, that is an issue, but repatriation could also impact the debt market. absolutely. there are two sides -- copies like google and apple who have been mashing -- massive issuers in the last two years, they can pull back. on the other hand, and this is a bigger factor when it comes to these companies -- they have been massive lenders to banks, mostly, at the three and five-year mid-of the bond market -- year end of the bond market.
8:34 am
google, intel -- defendant companies. the borrowing cost to the people they lead to will probably go up, and that is a discussion these banks are having right now about what they do about that. david: so, jeff, pick up on that -- if you say there will be less issuance, either the companies have less money to work with, or they are readjusting their balance sheet. it is coming from somewhere else. will there be an investment affect if they are issuing less investment-grade debt? regard to the companies, i do not think it necessarily will impact the investment, because i think the cash is there, and if they are not issuing, it is because they have access to that cash. i do not think it necessarily impacts the investment aspect of things, if you will. alix:alix: so, we are dealing with the issue of what it means for lenders and how much they have to increase their borrowing costs. on the flip side, if you have less issuance, and you have
8:35 am
foreign and domestic demand, that would mean tighter demand and prices. : we have had $6 trillion of issuance, and leverage is soaring. interest coverage is at some of the highest compared with gdp in a long, long time. it is actually a good thing that, you know, if they are actually going to be issuing less debt, and perhaps spending that money on growth. alix: so, if we wind up seeing strong the lab -- some kind of deleveraging, what is your strongest conviction trade? jeffrey: when i look at the investment-great market, i think prices already reflect the good news everyone is aware of. when i look at what is the procedure seen think right now, i would say that these, kind of, deeply subordinated bark -- bank markets that live on the cusp of investment-grade high-yield is
8:36 am
quite attractive and compares very favorably right now too high yield for the high-young market. you can buy what i would say are very good banks right now in terms of u.s. preferreds that close to 6%, which when compared to the overall high-yield market yielding around 6%, i think that is an attractive investment. alix: what has been attractive is an operation twist, sell the short end, by the long end. nabila: absolutely. you will see that flatten out more and people going out to the long end for these reasons as well. jeff, do you see that -- an operation twist action in investment grade market? jeffrey: we certainly see a fair amount of demand in the long end of our markets. i think a lot of that has to do also with -- when you look at the hedging costs for foreign investors with regards to hedging the currency, those
8:37 am
costs have gone up quite a bit and have made the front end less viable for them. so, it is not necessarily diminished thereafter that for our market, but it has certainly push them, i would say, down in credit quality, and out the curb. you have seen good demand out the long end of the curve in our market. alix: it will be exciting to watch. thank you so much, guys. nabila ahmed, and jeffrey cucunato. thank you very much. david: a big theme of the day is what is going to happen in 2017, and over the past few months we have surveyed some of the biggest newsmakers in business and finance about the risks they saw looking forward in 2017. the recurrent theme for them was geopolitical risk. here is what they had to say. >> the biggest risk i see in 2017 are two. first it is the expectations being so high, and the inability
8:38 am
of government to move as quickly as high as those expectations might be. all presidents come in with great ambitions and next vacations and they cannot achieve all at once. >> the weakening of democracies in europe, and perhaps in the knot states. we see a wave of right wing populism that will sweep away the pillars of democracy if we're not careful. north korea -- if north korea acts out to get attention by an attack on south korea -- that is a risk. india and pakistan -- the struggle between them is heating up. deaths on both sides of the line of control. they are both nuclear weapons powers. >> the biggest worry is really donald trump makes good of his campaign promise, which is really start to impose some kind of restriction or tariff on trade. other than that, i think the 2017 world economy, economic policy, they are on the pro growth side.
8:39 am
i am quite optimistic about 2017. i think world growth will be better than 2016, and i think asset prices will be higher. >> as we look at 2017, clearly the overall business environment and political environment are things that we watch very closely, and those could have big impacts on the economy one way or the other. the other is, obviously, any time there is any kind of, you know, exhaustion is event, whether it be -- exogenous event, a terrorist event or things of that nature, that could impact consumer confidence around the world. so, we are always doing the external look at the business environment, trying to understand the types of things that would impact consumers, government approaches, regulations, things of that nature. a i think there is possibility, always, of a black swan -- some foreign-policy crisis we do not anticipate today, or an economic crisis we do not anticipate today.
8:40 am
came into office, expected to do many things, and 9/11 happened. unexpected is really the biggest risk. david: we are now joined by marty shanker, our executive editor -- senior executive editor for government and politics. he is joining us from washington. if you listen to the newsmakers, it sounds like you will be pretty busy, given your title -- there will be a lot on your platter to cover. when we were trying to put together this year's pessimist guide to 2017, we had a hard time because a lot of things we thought were black swans were quite possible, including north korea and some of the other things that illustrious group of people mentioned before i came on. david: and some of those geopolitical risks originate in washington, it has to do with the trunk administration, working with the new republican congress -- what might happen with things like trade, things
8:41 am
like taxes, things like that. marty: i think that is the number one unknown, and while the markets, especially the equity markets, are showing great optimism, the relationship between the leadership of the gop and donald trump and the democrats, and how this congress is going to work through all the things donald trump wants to do is a great uncertainty. we just don't know how that is all going to work. david: how much more do we know about that today than we did six weeks ago? marty: i do not think we know much at all except that donald trump seems to be a nonideological president who picks people for leadership positions in his cabinet who disagree with each other, and some people we do not even know what their positions are. so, where is policy really going to come from is the big question. you put your finger on something that has struck a number of us -- this president, mourning anyone in recent
8:42 am
history, seems to have put together a cabinet that really is diverse, diverse in their dewpoint, if not their racial composition or gender, that they really disagree with each other, as you say. how can he car rallies people so that they are all rolling in the same direction? marty: that is the number one question -- how can he corral these people so they are all growing in the same direction? remains the number one question. pivotal issues like tax reform, foreign relations with israel, russia, china -- how we stand on trade, which is in direct opposition to what paul ryan in the gop leadership feel about trade. it is going to be a very difficult thing for him, but he is going to have to figure out a way to communicate directly and clearly what his policies are. david: thank you so much for being with us. marty schenker. coming up, with a holiday shopping season drawing to a close, we look at which
8:43 am
retailers did well, which did less well, and which may be fighting for survival as we head into 2017. this is bloomberg. ♪
8:44 am
8:45 am
this is bloomberg daybreak. i am taylor riggs. coming up and on a clock a.m. -- the press -- at 9:00 p.m., the president of the peterson institute on international politics of the u.s. and the u.k.. alix: this is bloomberg daybreak. i am alix steel. we are watching sears, rising in early trading. cupping lined up to $1 million in credit to fund operations. what is in store for companies like these and other retailers? we are joined by shelly banjo.
8:46 am
they had a huge quarterly deficit. how did they do this? shelley: it is continuing financial engineering by sears, taking money from one side of the business, moving it to another side of the business. they have a lot of debt coming due, and the issue is how long can they do this -- keep moving money around? they get money from their real estate. that is part of what they are doing. they get a lot of money from their ceo, hedge fund manager, eddie lambert. that is where the $200 million is coming from. who knows what is going to happen with sears. people have been talking about their deathbed the last five years. alix: you mention the debt coming due -- it shows how much that they have. in 2018, this is the bond principal they have coming due, and 2019 as well. they are quite levered when it comes to retailers. shelly: for sure, and they do not have much more to sell.
8:47 am
they have sold off big businesses like the lands end business. they have been trying to selloff die hard and kenmore, but they have not had much luck with that. this year will be. oh four sears. --pivotal pivotable for sears. extent do they end up as real estate place? it seems bricks and mortar are saying we are bricks and mortar -- actually not selling anything at all. shelly: that is what sears delved into -- they own all this real estate, so they will be a real estate company. they spun off properties into a real estate investment trusts. that is what these companies are trying to look into -- macy's, for example, saying what can we do with the properties that we own. 2017, whatng at retailers may not be with us, or which will have the hardest time. shelly: sears will be at the top
8:48 am
the list. it has been there the last couple of years. it is tough to kill a retailer. there are a lot of stores, a lot of cash coming in. another name to watch is j.crew, which is not publicly traded, but there is a lot of debt there. they have had a lot of issues with levered balance sheets they have. less so, kind of on the brink, but important to watch is macy's, and also the gap. issues thisa lot of year and this holiday season. you have seen big signs, 50% off, 60% off the entire store. that does not bode well for a retailer when they have to put the entire store on 60% off sales. onlineto what extent is eating it all up as a practical matter? alix: the one retailer -- shelly: the one retailer that continues to post gains is amazon -- getting more to sign up for their prime mentorship program, and this is why people are shopping.
8:49 am
consumer confidence is skyrocketing -- 12-year highs, depending on the gauge you look at. what is that translating into when it comes to actual buying? david: -- shelly: this number is the most interesting -- the highs of consumer spending, but when you look at the numbers, they do not match the conference. the question is why -- why are people so excited about the future? when it comes to what they end up spending, it does not match up. i have not been able to answer the question. if you look at just consumer confidence number is, you're missing the whole picture. it might be enough to get people excited about the future, but not necessarily about the present. alix: great stuff. we'll have to watch 2017. shelly banjo. time for other stories making headlines this hour. here is taylor riggs. taylor: in japan, takata corporation rose by the daily limit after a report the company is close to 70 criminal
8:50 am
complaint over faulty airbags did according to "the wall street journal" a deal may include pleading guilty to criminal misconduct. they were at the center of the biggest auto recall ever. european strategy and hybrid cars is paying off. the japanese automaker says it is on track for a 40% increase in sales of gasoline electric vehicle on the continent. hybrids accepted to make a more than half of toyota's sales in europe by the end of the decade. for the first time in a year, london's housing market has underperformed the rest of the u.k. according to nationwide building surveys. 3.7% thislondon rose year. across the country, housing prices were up 4.5%. nationwide says in london and the south of england, more people have found themselves priced out of the market. that is your bloomberg business business flash. i am taylor riggs. david: forward earnings ratios for national expanding rapidly.
8:51 am
earningsanalysts for per share not changed since the election? we'll explain that and more in our battle of the charts. this is bloomberg. ♪
8:52 am
8:53 am
bloomberg. is i am david westin. time for battle of the charts -- kevin kelly battles alix steel. for us, this is the first time. kevin: this is a big deal. alix: let's talk to kevin -- who he is -- he is the guy you go to to get the data for the chart. kevin: hopefully, beginners luck. for the debut chart i want to start with something simple that i has -- that i think has big implications. what i am looking at is the growth in forward pe ratios for two sectors that have done really well since the election, financials and industrious. the growth for pe for finances on the top, industrials in the
8:54 am
bottom in yellow. you see they pretty much move in tandem with each other. what is more important is when you look at the denominator, the earnings part, analysts really have not revised up there expectations, their estimates for 2017 eps here that is what the bottom bars are and they are difficult to see because they are so low. growth for next years earnings per share for financial and industrial company's. the big takeaway is as we ,ontinue to see the trump rally financial stocks continue to do well to do well. unless analyst get behind the truck trade, we'll potentially have the valuation questions in 2017. you can see the chart at g #btv 2831. david: great first job. one of these has to reconcile with the other. kevin: exactly. alix: this dovetails with what michael purvis said to us earlier in the week -- we could have a situation where earnings go up, but p/e ratios come down
8:55 am
at the end of the day. it is thing. i will try do battle here. david: the veteran here. alix: i'm looking at china -- a theme we have covered -- the white line is the offshore yuan rate, and the blue line is the onshore yuan rate. -- offshorerate is rate is actually moving lower than the onshore rate, which has stabilized. the offshore rate than implies traders are expecting a lot more downside next year. if you look at the median forecast, you are looking at 7.5 of 2017.our the end that is one of the critical issues for invitations for growth, capital outflows. it has inflows -- applications for government, and the rest of em. david: one of the biggest factors is what happens with capital flight from china and how they manage the yuan. the: and what happens to
8:56 am
u.s. -- what kind of pressure will that put on the offshore rate? david: here is a lesson -- she wins on the most important issue, but loses on the chart because the little red box is so small, you can hardly see it. kevin wins. kevin: 1-0. alix: sorry, -- david: sorry, ali. . -- alix coming up, adam pozen -- he will talk about the fed, the dollar, and how donald trump fits in. this is bloomberg. ♪
8:57 am
8:58 am
8:59 am
♪ >> welcome to bloomberg,
9:00 am
i'm alix steel. 30 minutes until the open here in the u.s.. here is where we trade. a tiny bit of weakness over here, coming off the closing-yesterday, european stocks switching into the closing territory here. the dollar is down 4/10 of 1%. we do have a bond yield across the curve that is down about two -- down about two basis points in at 1 p.m. we had a killer five your option yesterday accruing slightly softer. david: here is what you need to know. jobs, jobs, jobs. the president-elect announces that sprint will hire 5000 people in the united states, part of the larger program the company talked about. how much difference will it make for the u.s. economy? markets roaring into 2017.
9:01 am
is up.s up, oil can the trend continue in the new year? or are we just getting ahead of ourselves? uncertain china. china tightening positions should bet the yuan compared less against the dollar than other currencies. could it be a repeat of how we began 2016? that is what you need to know this hour. back to the subject of jobs, joining us now is our political reporter, ben brody. let's start by taking a look at what mr. trump had to say yesterday in the doorway of his house in florida. mr. trump: he said that because of the 5000 jobs [inaudible] it.will see they are also doing contract work, 3000 jobs. david: this is been something we have talked about before, how important it is, but this
9:02 am
strikes me that it's not the first time that donald trump talked about getting a thousand jobs. how can the president of the united states go company by company, 1000 jobs here and there, how is he going to run this administration of that is what he is doing? ben: i think he's going to be very busy and on the phone a lot. seemingly it's not the kind of thing you can do while also trying to conduct foreign policy and do an ambitious legislative agenda on the hill. maybe some of his representatives will be able to go company to company, that might be possible. it will certainly be in line with what he has been presenting as -- he can go out and go to these companies one-on-one. democrats and republicans never would have done this before. this is sort of a fundamental how peoplever believe the chief executive of the united states can interact with chief executives of companies. david: it strikes me that many in the media throughout the
9:03 am
campaign ignored his base, the people he was speaking to as they really underestimated the strength of the trump campaign almost at every turn. how are these sorts of announcements likely playing with the people that voted him into office? david: that's exactly -- ben: that's exact what it's about. it's about those people in those small communities where the local plants, local factories of closed. they see it as a major victory and pretending major victories to come. whether it makes a big dent in the hundreds of thousands of jobs that we were doing every month right now, you know, it certainly puts a big dent in the psyche of those people that voted for him. it's not only domestic policy that the president-elect was addressing yesterday. it was also for a policy. he came out to talk about what obamald do with president about to take action against russia. let's take a look at what he had to say. i think that
9:04 am
computers have complicated lives greatly. the age of computers has made it when no one knows exactly what's going on. david: i grew up in an age when russia and the soviet union had our adversary. we are seeing a seachange here now. why wouldn't his base being reacting to being tough on the russians question mark he seems to be embracing them. now his baset seems to be going along with it. they don't seem to be having an appetite for foreign thervention on international stage. they seem perfectly content to say -- well, this one went the andthat makes us happy vladimir putin is fundamentally different from some of those soviet communist leaders that we grew up with. they don't really care whether or not -- they also don't necessarily believe -- russia has fundamentally denied their involvement and any attempt to
9:05 am
involve the election. i think a lot of trump supporters take his word for that. david: a lot of things to look into in the new year. that was ben brody. for more on the trump impact on the u.s. economy next year, we bring in adam, the president of the u.s. institute of economics. happy new year to you. thank you very much for being here. if we arestion is, looking at an economy that is near full employment, what can donald trump really do with incremental jobs to move the needle? adam: that's a great question. the answer is nothing except make things worse. picking up in the discussion that david was just having about jobs, for the reason that no chief executive president of the u.s. has ever done this in the modern era is because it doesn't work. not because it's a different constituency. the going around and worrying about supposedly a thousand jobs here and there, which we saw
9:06 am
with carrier are not even really net jobs, in a column -- economy of 160 million people at any one time, that's like invading grenada and saying -- that's my foreign policy, america is top. or in the midst of hurricane katrina going down and holding a bake sale at one high school. you do this just to distract from the fact that you have no strategy and no overall plan. you actually do harm because everyone says -- well, if they are invading grenada and their only response is a bake sale, i'm going to get away from the u.s. that's what we're going to see with investment. if he is manipulating companies, leading them on the stock market , they won't invest in the u.s. anymore and jobs will go down. obviously markets and companies have to pay attention to what the president-elect has been doing. it's not only about what janet yellen has said about paying attention to what's going on.
9:07 am
what do you do in reaction or anticipation of a trump presidency? adam: you can do anything in anticipation of a trump presidency. that is however not specific to president-elect trump. that's a general rule. if you try to preempt what the politics of going to give you, you wind up looking political and you probably get it wrong. the basic rule of thumb for the fed and the other major central banks is that they take what they are given. if and when the president-elect announces a budget, when it passes congress, then the fed can recalibrate and say -- as a result of that we think that this will happen to inflation, to growth, but it is a mug and ultimately self-destructive game for a central bank, including the fed, to try to guess what happens next. 5 healthy growth -- alix: rachel sete -- healthy dose of skepticism this morning. this is my chart of the week, apparently.
9:08 am
the dollar under various republicans when they have had stimulus. the white line is the dollar under reagan. the blue line is the dollar under bush. the purple line right over here is the dollar so far under trump. do you think that a trump dollar echoing a reagan dollar is just that? and i knowre spot on you have been discussing this, that's a great chart. , ifcommon thread with them trump does what he seems to be saying he's going to do, is you have a very large fiscal stimulus when the economy doesn't really needed and that the stimulus is heavy on tax cuts so that the growth multiplier as well is low. put those two together and, going back to your previous question, david, that usually results in a lag in federal reserve types. that is a pattern that leads to an unsustainable boom bust. you get a sort of short-term recovery, you get employment rising beyond what sustainable,
9:09 am
you start getting inflation pressures, the dollar goes up, the fed goes up, and then the economy starts to turn around in the wrong direction. david: as you say, you call it a mug to game for central banks to try to anticipate what's going on. we looked back to what the fed did in december aced on projections from to rate hikes to three. yet they didn't really change their economic forecast at all. is that some indication that maybe they are anticipating what's coming around the corner? adam: no, you got it right. simply given what's happened to the dollar, what's happened to consumption in the stock market, looking backwards they can forecast that growth with employment being straight -- slightly stronger than what they were saying in november. it's an incremental change. you are absolutely right. they didn't change the fundamental forecast because until something happens,
9:10 am
including an actual policy passed bynd something president-elect trump, they should be moving ahead of it. adam will be staying with us. futures are relatively flat, i want to take a look at the commodity movers. gasoline futures are up by 1.5% with regular gas now the highest price since june. natural gas falling through yesterday up by 2%, huge reversal for natural gas, starting down by 2.5%, now up 4% at the close, down again now. a lot of cold weather now coming in. individual stocks that we are keeping our eyes on here, up 7%, at 1.11%, in line to finance money in a letter of credit and has gotten hammered of late, up about 5%. the ceo told me yesterday that trump could be good for
9:11 am
coal-fired power plants, of which they have about 3% of their business in. boost with newa contracts from multiple police departments, adding forces in about five different states. david? so much.anks coming up, london's housing market outperforming the rest of the u.k. of the first time in eight years. that's coming up next. ♪
9:12 am
9:13 am
♪ this is "bloomberg daybreak." the london housing market weakening for the first time in eight years, home prices underperforming the rest of the u.k.. joining us now for more is our u.k. economy reporter. lucy, is this about
9:14 am
affordability or brags it uncertainty? --it's really about growth both. people are being priced out of the london market. the ratio to income and property prices has really become extreme. london has always led to these fours. this is the first time we have seen it happen for a very long time. going to havere all the brexit uncertainty. london is a very international city based around the banking sector, which is excited -- expected to take quite a hit in brexit. this is something we will continue to see. indeed -- alix: indeed. but we have a report saying that u.k. financial officers are turning more optimistic than negative, and that spread is the widest in 18 months. what gives when we have this uncertainty? well, it's interesting,
9:15 am
isn't it? i think with happening here as we have cautious optimism. you are right, it's of the highest level in 18 months but they are very risk-averse. looking at things like improving cash flow and trying to get costs down. optimistic, nine out of 10 of them have said that they are in a state of high uncertainty about the economy going or would. they don't really know where they stand. but as it is, we haven't really seen the brexit hit some people yet. it could be that we aren't going to see these dire effects. still, the uncertainty remains. thank you very much, lucy meakin . we have the scottish national party trying to get clarity from theresa may, they have citizens from the u.k. that might want to leave if they don't have certainty. people are waiting to hear from her. what is her strategy? what is she going to ask for? she really hasn't given much up.
9:16 am
continuing on the subject of .rexit, with adam posen last time we were together on the air, it was the day of the bank moved decision and they said -- stay the course, we won't go either way. you told us, repeatedly and wisely, that we just don't have enough data yet. the patient, it will take some time. this is seven weeks later. do we know more today than we did seven weeks ago? -- lucy: we know up -- adam: we know a couple of things. the things that we know now are that wage growth has continued to slow and in fact the rate of growth is falling and that real wage growth, given inflation has risen, is going badly in the u.k.. that is obviously anti-inflationary. need forcan reduce the
9:17 am
the bank of england to worry about raising rates. it also tells you that the brexit uncertainty and more importantly, brexit itself, is making things worse rather than better, the productivity problems we have seen in britain. david: you have also admonished us to be shouldn't spend too much time on inflation alone without paying attention to where the yield rate is. it's about being untethered, unanchored. what's going on at that relationship? me feelvid, you make like these appearances mean something. the issue is as you said. it's when the currency is moving down at the same time that interest rate governed bonds are going up. that's when the public should get worried. yields have begun to see interest rates rise. you have to disentangle the u.s. rates going up. so part of it is that. not brexit or u.k.
9:18 am
specific, but you are starting to see expectations stay up in the u.k.. clears why it still not yet for the bank of england which way to move. are certainly seeing emergence in the u.s. dollar in the pound sterling. what about the relationship between the u.k. on the one hand and europe on the other? adam: fair trade deficit is not the end of the world, but if they are going to be leaving in trade terms, that's likely to get worse for a few years. so, the pound on fundamentals really needs to adjust more against the euro in the sense that it is inclined to help make up for that bilateral trade deficit. it is also, more importantly, the overall trade deficit is just a reality of the bigger part of their trade with the u.s.. to me, sterling, you have to
9:19 am
believe in them worrying not just about the dollar. sterling, even more so, we have to look at the euro sterling rate more than the u.s. sterling table. finally, adam, let me be unfair to you. let me help you to advise theresa may for a moment. as we have been talking about, we don't know much about her negotiation strategy. if you were to speak to her right now and say that this was the most important thing, what would it be? two things. first, decide. you made the call that immigration control is more important to you than anything else. your constituents and backbench that that's what you want, because of that's what you want there is a very clear path here. you can get immigration control back, largely, with respect to eu market -- migrants, but you have to give up a lot. begsecond thing is i would
9:20 am
her to reopen the vote and reconsider brexit and if she didn't, i would resign from advising her. say it's an to existential issue for the u.k., but as a policy decision it's just so wrong that i don't think people should be staying and advising her. powerful the. thank you so much, adam, that's adam posen. alix: brexit posing a big geopolitical risk in 2016. you have trump, brexit, we will break it down, next.
9:21 am
9:22 am
alix: this is "bloomberg ." break i'm alix steel it was year for megadeals, but we have a lot of political upheaval coming, what will that mean for the m&a market?
9:23 am
for more on the outlook, we're joined by bruce davis, who wrote the story. first, let's talk about the deals. you have seen the deals of the year. anheuser-busch is just one of them. what are we going to see? >> we have seen a lot of megadeals. keep in mind, this is nearly 600 billion in mna, killed by increasing scrutiny and regulations. you have three big things for next year, right? the most people are talking which has axit, structural change. we have people coming in saying that the u.k. may need a new industrial strategy. i think it was two years back when somebody told me that the u.k. is the worst dinner table when it comes to mna. presentsure that the government shares the idea. you will probably have completed you looking at the u.k. taking a
9:24 am
step back with china -- which accounted for $200 billion in , announcing day one constraints going out of the company -- country. it's the strategic news for china going ahead. people seem to be more bullish about trump than the others based on what they are telling us. you mentioned -- alix: you mentioned regulation is a risk. big thing the one that everyone is talking about his potential corporate tax creation. if those companies are allowed to bring money back into the country, something that they have had to pay huge taxes on, causing a wave of deals, and they can make that money back you would imagine that they would probably be more having .&a with more share buybacks
9:25 am
if you are a u.s. company looking at the rest of the world you are going to say that now that the tax angle is off the table, i'm going to assume this deal only if it makes a lot of strategic sense. will see themf we as active on global m&a. david: i wonder if you might have more international deals and fewer international deals. whether it is china, u.s. of the u.k., you could wind up with big deals, but they will be domestic deals rather than international. that's a very interesting point. we had people, when i was researching for the story, talking about just that. if you look at europe domestically, the deal this year was the highest it had been in 26 years. maybe that will change in terms of companies coming inside of europe. are sayingl makers
9:26 am
that they expect more consolidation within the continent. whether that is in industrials, oil and gas, or the s&p sectors that haven't seen a lot of deals, i can definitely -- you are probably going to see more of those deals as you call them. maybe not so many big cross-border. ruth, great to get your perspective. we are back, four minutes away from the open bell -- opening bell. u.s. equity futures going nowhere fast. a tiny bit of weakness in europe, looking at negative territory for the year, but volume is off 50% over the 10 day moving average. money coming into treasuries. you have a dollar that's weaker on the day. this is bloomberg. ♪
9:27 am
9:28 am
9:29 am
♪ this is bloomberg. i'm david weston. we are moments away from the opening bell on this next to last trading day of the year. you can see that futures are down across the board just a
9:30 am
little bit, but we are anticipating trading -- trading has been down so far. the dow jones is down 12 points. the s&p is off. ♪ [opening bell] david: the dollar, weakening across the board. there is some actual strengthen the market, money going back in with options for the afternoon, the yield is down, bonds are up, and crude oil is off of the highs after seven days of straight gains. that's where we are at this point. now it's over to you with the bell opened. alix: pre-much flat indices across the board. the s&p, relatively flat. remember it had its worst day yesterday since june. since october, i should say. it was a pretty ugly wednesday with the nasdaq going nowhere. trading in a tight range all morning within the s&p, and it looks like it would contract -- continue to trade on that tight
9:31 am
range heading into the day. we have some individual movers we wanted to highlight, up 3/10 of 1% on the plan to bring back or create 5000 jobs here in the u.s. got some good, you've got some bad. coming out and saying that they don't like nvidia. but goldman saying that they could unveil great consumer products in early january. off by about 2%, giving back a little bit of the games that saw yesterday. remember the huge jump it saw on speculation with brands that were associated with potential buyers that had risen with it. that is your look at the individual movers. one chart that i really wanted to highlight that to me was the biggest question headed into 2017 was what happens with china and what will happen here in the u.s.. take a look at my bloomberg here. i bring out this chart a lot, but it's my favorite. one month volatility with the
9:32 am
index on the shanghai composite. we have recently seen that volatility picking up in the shanghai composite moving lower as the s&p continues to grind higher. what happens at the beginning of this year, early 2016? a spike in volatility with a decline in the s&p and in the shanghai composite. remember january and february? we had something very similar in august of 2016. volatility jumping, stocks selling off. are we immune from those events now? or does china have the power in the first quarter of the year to bring the s&p down with it again? david: an important question. more, mike with regan. last year this time we thought we were doing well. really the markets took a real
9:33 am
hit and it was led by the asian equities. chances we will have a similar repeat for the markets here? remember the energy complex was a big part of the story. oil was really low. it was a good week to start the year. trump has obviously got a lot of credit for the stock market rally so far, but if you stop and step back, oil was the asset that i think led everything. looking at global markets, some of the best benchmarks of the toronto, canada, broader terms, up about 20%. the energy sector in the s&p 500, 25%. oil, up 50 to 55%. becomes how now much optimism is baked into the energy complex going forward. looking at earnings of 300% last
9:34 am
year. traditionally you have the dollar and oil with reliably negative correlations. the dollar gets strengthened, the oil goes down. everyone expects the dollar to continue strengthening. everyone wonders of u.s. shale producers will respond to these higher price or's and beef up output. like last year. asia is going to be a huge focus . the dollar strength in oil will also become a focus in january. you said it yourself, a lot of that oil price is the opec deal. it has to hold have the benefits you're talking about. and the non-opec agreement --mike: and the non-opec agreement that followed it. it's as funny environment where they get excited in the disappointed down the line. there is already rumbling over whether the deal will stick and will its stake if shale producers get more aggressive and ramping up output. alix: from where you sit, what
9:35 am
is going to lead stocks next year? it is really remarkable to see what the hedge fund base has done about energy stocks. so, they were kind of the last short, but had a net we have finally seen that pick up and they are increasing the long, getting into a very long position on energy stocks. of changebeen a kind in opinion about what's going to happen with these shares. to your point, that's not so much the focus anymore and it seems like that with this trump rally it has really become domestic lead stocks. i brought this chart with me showing how options traders feel about small cap stocks. it's remarkable because typically you will see this as the spread or skew on option setting on rise or fall. the lower it gets, the cheaper it is for traders to buy options that predicted the russell 2000
9:36 am
to fall, essentially saying that the lower the gap, the more optimistic they are. right now it's at the lowest since august, which is remarkable as they have outperformed the s&p are -- s&p nearly twice so much since the trump election. maybe you think we should take a breather here to see what happens with these policies before we for money in it? with trump coming into office, they are saying that these stocks indeed have more room to run. we saw a blowout of -65 billion as they were hurt ivy stronger dollar. david: that's right, export doesn't want the small dollar, but it's interesting, this phenomenon. when i spoke to brian moynihan last week, he emphasized those small and medium customers coming in and expressing confidence. what's driving that lift? >> they are less exposed to foreign sales, so a stronger
9:37 am
dollar is only going to help rather than hurt the exporters on -- among the larger caps. i think that the question becomes what sector we really need to start looking at. the trumpwith election, financials took off. industrials, there's a lot of optimism about tax cuts, obviously, lifting all boats. with infrastructure i think it's going to be interesting to see what the priorities are at the beginning of the administration. everything am reading, people are getting skeptical that there will be a quick payoff from that. companies like caterpillar, it has negative earnings growth for next year. but the valuation just blew out after the election. people very optimistic that the spendingstructure would come. the question is, where do you pick your spot? across on a rising index the board because of tax cuts?
9:38 am
or du zero in on the sectors? and still it all comes with uncertainty, but it was interesting to see what happened when you had the annual trading range for the s&p at 460 seven points, the most we had seen since 2008. does that kind of get repeated? or once we get to certainty, do we kind of finally settle down and say -- now we can fully invest in things? another way- dani: to look at this is valuations going up on a wider trading range. but there are a couple of things there. it one, i mean, if you do based on valuation, you would have missed out on a lot of the bull market. there is that line of thought, saying that valuations might look extended. you have a very wide trading range that perhaps doesn't repeat itself. but then look at history, we miss out.
9:39 am
stocks to dou.s. what analysts expect them to do, we need to kind of see the economy achieve the feat it's never done before. looking at other times where we haven't had a recession, seven and a half years, at this point it's very difficult for companies to grow earnings by 10% of what analysts expect them to do. there are reasons to be skeptical. but it is possible, like we saw this past year, even though we went underneath what the previous year low was and extend it be on the high, it can happen again for sure. and in fairness, mike, .t's after-tax earnings it's not just the infrastructure spending that might take time to come through. tax reform, cutting taxes could really affect the earnings of corporations in the here and now. mike: oh absolutely. repatriation will just be the biggest stimulus we can look at in the market.
9:40 am
the questions, though, become -- what is that going to do to the deficit? is it going to increase the supply of treasuries next year? how much will that cause rates to rise? or the fed to react? that is sort of the balance that could keep things in check. therefore, will the republicans the house allowed to go forward? mike: another one of those unanswered questions we can look forward to in the next few months. david: thank you both for being here today. coming up, julian emanuel, ubs director of u.s. equities, weighing in on market bullishness. this is bloomberg. ♪
9:41 am
9:42 am
9:43 am
"bloombergs is daybreak." in the green room coming up later, connor says that there are numerous estimates regarding immigration. we are just 12 minutes into the trading session here in the u.s. and this is where we stand outside, relatively flat, outside 2/10 of 1%. they had their worst selloff yesterday since october, climbing its way of it back from that level. volume is very light. volume for the s&p is off against the 10 day moving average. the industrial materials and utilities are seeing an upside in the s&p. abigail? abigail, gold is up for its fourth day in a row, the longest winning streak since the fourth and since the election. since that time gold has actually been down 10%.
9:44 am
this could represent a bit of a rebound. interestingly the chatter on gold has been more bearish and fittingly with this year to date chart gold is actually higher on the year, but we see that it in july and was down more than 15% since that time. higher,higher, not just but also on pace for its best year since 2011. the gain is not so huge that it may not reflect the fact that gold has been in a bear market, seeing a rebound on the year. one reason to think that gold can continue higher, we took a look at our have tagged -- hash trading rangeing channels with gold trying to find support in the middle of the channel, suggesting that it could happen in the new year with a relative strength index below 30 and a buy signal with gold oversold. back above that, when it happened in the past, gold has
9:45 am
traded higher. the strength in gold is also helping many of the miners, which are all higher for four days in a row. on the year it has been a really stunning move for both new model mining and barrick gold, having their best years on record, up more than 70% and its best year since 1982. real strength for gold on the air. gold also helping to lead the ftse 100 to that record yesterday due to the fact that gold was so strong. speaking of, julian emanuel of ubs joined daybreak last week and sort of weight in on the strength of the gold market. climbed anhas unprecedented amount. whether there is uncertainty about were earnings growth, which we haven't had for two years and we are about to have again, or it is the implications
9:46 am
of an oil price crash on the economy or, let's face it, incredible divisiveness within the political sphere within the u.s.. perversely, in the logic of financial markets, the last six weeks have really taken down that wall of worry and replaced it with a really, really deep sense of optimism, almost euphoria, if you will, that we think in the medium-term is perhaps reflected in prices. >> that's what you were the lower end of the target on the street for 2017. wendy you think that catches up with the rest of wall street as they sit around this table and they say -- i hope, i believe we get those good things? caught up with steve or federated investors who said it wasn't a wall of worries, it was a wall of hope. take a listen. >> we are due for a straight move up. the question is, how deep of a pullback?
9:47 am
in a hopeful environment the pullback is likely to be shallower and shorter. for sure, we are not holding ourselves on equities here, but we are advising our investors to buy as opposed to sell the rally. purchase the dips, let's get tactical, with abby the story through 2017? julian: we continue to think that will be the story. where i would differ is that you look at the vix at 11 right now or so. that signals a sense of complacency. again, it could well be that the whole thing that has built up over the last six weeks gets materialized over the course of 2017. but the fact is that 19.2 with an16 earnings implied growth rate of 12.4% in earnings next year, a lot of it is in the price. where we would differ again is that we would think the volatility episodes are likely to be sharp on the order of a we
9:48 am
saw prior to the election and prior to the u.k. referendum. >> it's one thing to have a bullish spread, but it's also unanimous. we are well into this cycle. well into the run. maybe the bull run isn't over yet, let some point it has to end. does it make you nervous on that ground alone? being: we would prefer contrary ends, make no mistake about that. is surge of optimism something that, strangely, in the logical market has its concern. where we would be even more concerned is actually if you got this surge of optimism, a wall of money coming into the market, and then the legislative agenda starts grinding as opposed to moving quickly. it really is about what can get accomplished. >> think goodness that has ever happened in washington. the legislative process grinding slowly?
9:49 am
if we are really expecting donald trump to defy gravity. he may accomplish good things, but we are expecting is a tall order. >> the other side of that argument is that by the logic of past situations, where republicans have dominated the republic -- executive and legislative branches, they have been able to deliver in terms of equity market returns, but this one is a bit different. the bad feeling that has been there for the majority of the year still seems to be below the surface. but the confidence in the economy is there. >> let's talk about that confidence and emotions,. . going to a -- going crazy about 20,000 points. is that important? term it is.ort the fact is that crossing through 20,000 isn't likely to .ring that surge of money
9:50 am
it proves that when we look at our data, in fact the asset allocations that the fed has engineered by keeping rates low for the last eight years has caused equity exposure to move to its highs and money market exposure yielding to its lows. >> earlier we talked about the fear of missing out, so you should do the same. the fear of missing the upside in the markets, how pervasive is that right now? you got your 2300 target above 500, the fear of missing out, is it becoming more dominant? >> the options market is sending a clear message that fear of missing out is ruling markets at the moment. money calls are now priced historically expensive. to 2400, are moving 2500, with a surge of emotion firstget us to in the
9:51 am
quarter, people really actually fear it rather than are trading for it. >> do you go into neutral? or is it it an opportunity to go short? julian: it's an opportunity to look at the sectors that are going to work. so, basically be found that if you look at the past 20 years or so, there is a pronounced effect for the prior year losers to outperform in the first month of the new year. what is interesting about this particular cycle is that after the election, areas like health care and technology have really been left behind more than usual , given the sort of surge of confidence and infrastructure and so on that has carried industrials, energy, and financials to new highs. we think that those sectors are likely to really be bought once this is over. that was julian emanuel at
9:52 am
ubs. so much to include in 2017. david: yeah, we got a lot to cover coming up. a lot of stories, that's for sure. coming up in the next hour, "bloomberg" with vonnie quinn. vonnie: giving an eye on the top headlines of the day, -- keeping an eye on the top headlines of the day. i'm sure that it's not a also, jobs that he is talking about and getting those inventories at 11 a.m. eastern from the energy administration. that will be an interesting one to watch, considering oil will be dropping for the first time in many sessions. some of our guests today include the coverage of fedex, we will be asking about the outlook for , helped by season e-commerce even when retail is suffering. , the ceo of nyse palace fitness is going to be there in honor of their
9:53 am
sponsoring the times square in new york new year's eve event once again. judgment free? analysts are not judgment free, they are positive on the change. david: coming up, our key takeaways. words for has strong the u.k. prime minister. this is bloomberg. ♪
9:54 am
9:55 am
david: this is bloomberg. i'm david westin. the key take away from the program today came when we talked with adam posen. he did not mince words about what he would tell theresa may about how to handle brexit. adam: i would her to reopen the vote and reconsider brexit. and if she didn't, i would resign from advising her. i don't want to say it's an existential issue for the u.k., but as an economic policy decision it's just so wrong that i don't think that people should be staying and advising her. david: his advice, undo brexit.
9:56 am
of that are seeing some and the u.k., some of its on portability, but a lot of it is uncertainty. david: it's a big problem going into 2017. alix: 25 minutes into the session, this is where we stand on the second to last trading day of 2016. the last flat flab. volume is off. you have utilities and telecom on the upside. a little bit of weakness in europe, but the story really is the reversal of the dollar. purchasing across the treasury curve, softness in crude as well. i wish you a happy thursday, see you tomorrow. ♪
9:57 am
9:58 am
9:59 am
♪ york, i'mom new vonnie quinn. welcome to "bloomberg markets. ." ."
10:00 am
♪ we are going to take you from new york to london and covering stories out of milan and macau. president-elect donald trump says he is taking credit for bringing 5000 jobs back to the united states and patching things up with president obama. year's selling season has been less for companies like amazon? we will talk to helane becker. the italian prime minister delivers his year-end news conference. we will tell you about what he said about the future of italy's troubled banks. we are about 19 minutes into the close in europe. the stoxx 600 is

34 Views

info Stream Only

Uploaded by TV Archive on